Americans are struggling, but you’d never know it from their credit scores

Stressed Man Looking At Too Many Credit Cards In Home

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  • Federal relief measures, including stimulus checks and a pause in loan repayments, have given some Americans a temporary boost during the coronavirus crisis.
  • If you are worried about making ends meet when that relief runs out, here are some steps to take now.

Despite widespread job losses and financial uncertainty, Americans are faring well by most measures during the coronavirus pandemic.

Federal relief, such as stimulus checks, expanded unemployment benefits and an extended pause in loan repayments, have even given some a boost.

Consumers are paying down debt and saving more than they have in decades. Many are leveraging low interest rates to refinance and lower their monthly bills or catch up on past-due payments.

As a result, credit scores, a general measure of credit worthiness, have improved across the board. In July, the average national credit score hit a record 711, according to FICO, the developer of one of the most commonly used scores by lenders.

But that’s not the whole story.

“While the signs are positive, we are cautiously optimistic in light of the economic uncertainties created by the pandemic,” said Rod Griffin, senior director of public education and advocacy at Experian.

The extended pause in the repayment of certain loans — including federally backed mortgages and federal student loans — gave many borrowers a reprieve during the current economic crisis.

Credit reports show those loans as current, even though borrowers aren’t making payments — and likely cannot afford to.

“On the surface, the consumer credit market is performing quite well,” said Matt Komos, vice president of research and consulting at TransUnion. “Serious delinquency levels remain near record lows.”

“However, the performance of those accounts still in accommodation will help shape the true consumer credit picture,” he added. “With many accounts expected to come out of accommodation between March and May, most notably mortgage accounts, we will soon see the true impact of those programs for both consumers and the credit marketplace.”

President Joe Biden recently extended the payment pause on federal student loans through at least September. His administration also moved to extend mortgage payment forbearance through the end of June.

(Pandemic Unemployment Assistance and Pandemic Emergency Unemployment Compensation have been extended through March 14. Workers who don’t exhaust their allotment of benefits by that date can continue collecting benefits up to April 11.)“By next fall, I have to imagine that there is going to be a tsunami of people needing debt relief.”Howard Dvorkin -CHAIRMAN OF DEBT.COM

While economists argue that government stimulus is meant to provide a stop-gap until the economy picks up and jobs become more readily available, once consumers get used to not paying certain bills, the money gets re-prioritized elsewhere and it’s hard to revert back, according to Howard Dvorkin, chairman of financial education site

“By next fall, I have to imagine that there is going to be a tsunami of people needing debt relief,” Dvorkin said.

If you are worried about making ends meet, Dvorkin recommends switching to cash to immediately curb spending and avoid racking up additional credit card debt. Then, put any extra funds toward paying off the loans with the highest interest rate — also called the avalanche method of debt repayment.

TransUnion’s Komos also advises borrowers to get in touch with lenders now to explain the financial constraints they may experience when federal relief runs out.

“We always encourage consumers, if they are getting into a challenging spot, be proactive and reach out — don’t wait.”

Many lenders have shown a willingness to work with borrowers on loan repayment, often on a case by case basis.


Michigan license number:   DM-0016282 Available to the public and licensed in Michigan.

Section 13(1)  When a licensee establishes a debt management plan for a debtor, the licensee may charge and receive an initial fee of $50.00

Section 13(2)  A licensee shall attempt to obtain consent to participate in a debt management plan from at least 51%, in number or dollar amount, of the debtor’s creditors within 90 days after establishing the debt management plan. If the required consent is not actually received by the licensee, the licensee shall provide notice to the debtor of the lack of required consent and the debtor may, at its option, close the account. If the debtor decides to close the account, any unexpended funds shall be returned to the debtor or disbursed as directed by the debtor.

Sec. 14. (1) A contract between a licensee and debtor shall include all of the following:

(a) Each creditor to which payments will be made and the amount owed each creditor. A licensee may rely on records of the debtor and other information available to it to determine the amount owed to a creditor.

(b) The total amount of the licensee’s charges.

(c) The beginning and termination dates of the contract.

(d) The principal amount and approximate interest charges of the debtor’s obligations to be paid under the debt management plan.

(e) The name and address of the licensee and of the debtor.

(f) Any other provisions or disclosures that the director determines are necessary for the protection of the debtor and the proper conduct of business by a licensee.

Sec. 18. (1) In addition to the fee described in section 13(1), a licensee may charge a reasonable fee for providing debt management services under a debt management plan. The fee under this subsection shall not exceed 15% of the amount of the debt to be liquidated during the express term of the plan.

(2) A licensee may offer a debtor the option to purchase credit reports or educational materials and products, and charge a fee to the debtor if the debtor elects to purchase any of those items from the licensee.  Fees charged under this subsection are not subject to the 15% limitation on fees described in subsection (1).

(3) Except for a cancellation described in subsection (4), in the event of cancellation of or default in the performance of the contract by the debtor before its successful completion, a licensee may collect $25.00 in addition to any fees and charges of the licensee previously received by the licensee. This $25.00 fee is not subject to the 15% limitation on fees and charges under subsection (1).

(4) A contract is in effect when it is signed by the licensee and the debtor and the debtor has made a payment of any amount to the licensee. The debtor has the right to cancel the contract until 12 midnight of the third business day after the first day the contract is in effect by delivering written notice of cancellation to the licensee. A cancellation described in this section is not subject to, and a licensee shall not collect, the fee described in subsection (3).

(5) If a debtor fails to make a payment of any amount to a licensee within 60 days after the date a payment is due under a contract, the licensee may, in its discretion, cancel the debt management contract if it determines that the plan is no longer suitable for the debtor, the debtor fails to affirmatively communicate to the licensee the debtor’s desire to continue the plan, or the creditors of the debtor refuse to continue accepting payments under the plan.

(6) A licensee shall not contract for, receive, or charge a debtor an amount greater than authorized by this act. A person that violates this subsection, except as the result of an inadvertent clerical or computer error, shall return to the debtor the amount of the payments received from or on behalf of the debtor and not distributed to creditors, and, as a penalty, an amount equal to the amount overcharged.

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Lansing, MI  48909-7720

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